IMF consultation in advance of the PSI review

11 April 2008 | Minutes



Vasuki Shastri, EXR
Patricia Alonso-Goma, PDR (below as PAG)
Ben Kilmanson, PDR
David Hoye, EXR
Jan Kees Martijn, PDR
Eddie, PDR
Jenny Bisping, EXR
Patrick, IMF Finance Department

NGO representatives

Benjamin Ogbalor, Nigeria
Andrew Kumbatira, Malawi Economic Justice Network
Aldo Caliari, Center of Concern
Peter Chowla, Bretton Woods Project
Rick Rowden, ActionAid Int’l USA
Collins Magalasi, ActionAid Int’l Malawi
Elizabeth Stuart, Oxfam International
Peter Lanzet, EED – Germany
Bhumika Muchhala, Bank Information Center
Soren Ambrose, Bank Information Center


PAG on the background/history of the PSI

  • The IMF had intensified surveillance in Nigeria and in other places
  • Countries wanted something more formal than just surveillance, "they wanted credit for their good policies"
  • The PSI was a response to this demand from country authorities
  • Before the PSI in 2005 a questionnaire was sent to 75 low-income countries and 50 donors soliciting input on this idea – agreement that there was a gap in coverage from the IMF
  • The first draft paper to the boardin July 2005 was not agreed: the board wanted regular reviews of countries(no delays) and that the PSI is restricted to LICs
  • On this policy review – they haven’t started yet so don’t know the details; traditionally a review will look at country opinion but also talk to donors, academics, CSIs
  • Some of the questions likely to be asked:
    • Basic things like, who used it and why? Did it achjieve its objectives
    • Should it be extended to non-LICs
    • Should it be more explicitly linked to Fund financing, esp the ESF

Some clarification was requested on the fact that some middle-income countries expressed interest in the PSI

PAG response:

  • Namibia, Central Asian countries asked about whether it was appropriate; It seems that they want to send a signal to donors and the market; this was mosre likely to be smaller and poorer MICs
  • But this wasn’t explored in detail as whether it was relevant because the PSI can not be extended to MICs now
  • There are concerns on competition between a CCL-successor and the PSI
  • Part of the reason to ask this question is that the financial landscape is changing, with less need for Fund financing

Ben – some countries may have wanted to signal that they are far away from Fund financing – hence by a precautionary SBA or CCL-successor may not be as ood for them

Eddie – We will likely look at the contrast between the PSI and the programmes which came before them

Benjamin Ogbalor – knowledge of instruments is very limited in CSOs in countries, we are not even aware of what is taking place, what are the contents

  • What can we improve on the process so more people can know about the agreements and the benefits or costs. Even government people not know about it.

PAG – ministers know very well what we are talking about, They are very impressive

Someone else from IMF – Fund has lots of instruments, it is country driven

  • PSI has links to PRSPs, so that is an option for country engagement

PAG – no money attached, so they don’t come for money, they get something else out of it

  • Link to PRSP – come from country driven programme
  • MICs don’t have PRSPs – so you are breaking the link?

Liz S – Fund can drive process of engagement with broader stakeholders

Ben – Fund engagement is narrow part of government policy, government engagement may be weak elsewhere

  • We would be criticised if we demanded specific kinds of criticism

Liz – Fund did push consultations in PRS process

PAG – I liked PRS process, it opened up room for other discussion

  • Dissemination of information was useful for accountability
  • PRS process has taken a life of its own
  • PSI countries are the success stories, they have less problem in consultation

Soren – its is about signalling, but lets talk about content

  • Comparing PSI and PRGF documents – unable to detect systematic differences, no change
  • But PSI is sold as a programme for mature stabilisers – is it possible to make PSI more medium-term growth oriented?

Peter Lanzet – what is the difference now? PRGF is it different or has it changed?

  • PRSP – social policy is emphasis – but not equivalently developed in macropolicy

Collins – Do you see yourself as more involved in Nigeria, did PSI mean extra involvement?

  • See a conflict of interest – you say it is demand driven, it is a signalling tool
  • The Fund is the judge and the jury on the signalling question
  • Shrinking of fiscal space and policy space in both PRGF and PSI

PAG – We ran our numbers – PSI programme higher levels of growth compared to PRGF

  • Spending programmed to rise in 4 out of 6
  • All programmed for widening credit account deficit
  • Inflation targets – higher than PRGFs
  • PSI has a low inflation target in Senegal only – but part of a currency union
  • The idea is higher growth; not just inflation; consistent macro-framework; inflation outturns can be higher and still meet other targets
  • PSI countries are looking more at big projects – incl borrowing for these
  • Some countries went for PRGF instead of a PSI – might want access to Fund financing – PRGF augmentation I faster than PSI + ESF
    • Zambia is doing low-access PRGF
  • Signalling – it is a by-product of what we do with countries
    • Enhanced surveillance in Nigeria was already there – so we were sending a signal – so much not difference
    • It is not an on and off switch depending on what Fund says
    • More and more donors say we make up our own mind
  • We concluded all PSI reviews

Benjamin – people are measured on politics not based on merit or capacity

  • If you can open the process a little bit, you can get more input and get outcomes that best represent the state of the country
  • Those who are deciding and making decisions are not the best people to make a decision with

PAG – we are there at the invitation of the government, we can only widen conversation to the extent allowed by the government

  • More information and publicise then more possibility to enter the conversation
  • Our role to provide more information, we can’t intervene in political conversation, we can’t be seen to meddling
  • We like to discuss with Parliament, oppositions, etc

Benjamin – CSOs are not aware or not have capacity, think about what to do because it has not worked yet

PAG – different people mean different mean different things by fiscal space, additional real resources (not printing money, not inflation)

Peter Chowla – The PSI and PRGF is not suffciently linked to PRSPs – reference the last IEO report on Africa

PAG – this is because the PRSPs were not good enough; they did not have elaborated medium term frameworks or spending priorities

Peter Chowla – part of the problem is that the PSI is not the right signal for aid agencies. They need to know more baout aid absoprtive capascity, capacity contraints, and not just Dutch disease. Need to think of a mechanisms that blends all the right elements if donors really need a signal. Suggestion that this could be done by anyone – and that there should be an explicit market for assessment

PAG – there is already a market, Standard and Poors already have credit ratings of some poor countries. We are not a monopoly, anyone can do this.

Notes end here – notetaker left the room. We are searching for complete notes.